Long-Term Care Insurance

Since I’m now facing middle age and I have several friends who are taking care of their parents, I’ve started looking into long-term care insurance (LTCI). Also, in talking to Dot, Coach Les Murakami’s wife, for this issue’s cover story, she shared with me why she decided to buy long-term care insurance — even though her husband didn’t think it was a good idea at the time.

In speaking with our Generations Magazine’s financial expert Michael Yee, CFP, I quickly realized that there is a lot to consider when purchasing long-term care insurance. I thought I would share some of what I learned with you.

“First, you will need to understand what long-term care is,” Yee says. “Most long-term care is given by non-skilled personal care assistants. They help clients with “Activities of Daily Living” (ADLs), which include bathing, dressing, using the toilet, transferring (to or from bed or chair), caring for incontinence and eating. They can also offer substantial supervision for cognitive impairment from depression, Alzheimer’s or dementia.”

The Hawai‘i Department of Health indicates that approximately 7 in 10 seniors will need some form of long-term care. The average length of care is 2½ years; some will be less, some more. It can happen to you at 55 or 85. Age by itself isn’t the only factor. The cause could be age, illness or accident. Medicare, nor health insurance, will pay for most of it.

Not everyone is lucky enough to have family or friends who are willing, able or available to be caregivers. Many seniors don’t want loved ones to be burdened with caregiving.

Whether you’re cared for at home or in a facility, it will cost money. A newspaper article I read indicated the average nursing home cost in Hawai‘i is $100,000 per year and is rising faster then the general rate of inflation. Homecare could cost as much as $50,000 per year. In either case, a family experiencing LTC could find themselves burning through their nest egg in no time.

Long-term care insurance protects you from having to use your savings and/or the equity in your home. LTCI is a promise from an insurance company to pay in exchange for discounted dollars or premiums paid for by the policy owner. Some policies make no distinction between home care and facility care, some pay more or less for each level of care. Some policy’s are like car insurance, you either use it or lose it. Others offer the ability to share benefits or inherit the unused portion between spouses’ policies. The more they cover, the higher your premiums may be. Regardless of the insurance plan, you need to consider the financial stability of the insuring company. Many people look to A&M Best, Moody’s or Standard & Poors to determine a company’s financial health.

“Here’s the dilemma,” Yee explains. “The best time — the most affordable time — to buy long-term care insurance is when you’re young, healthy and don’t need the insurance. By the time you’re older and need care, many insurance companies won’t underwrite the risk of your health issues. When applying for LTCI, sooner is better than later.”

Let me put it another way … the cost of being in a nursing home for 1 year in Hawai‘i can cost more than a 4-year college tuition.

If you’re looking for qualified financial advisors to answer your questions about LTCI, you may want to contact the local chapters of the Financial Planners Association of Hawai‘i (www.fpahawaii.org) or the National Association of Insurance and Financial Advisors (www.naifanet.com/honolulu). I also found www.longtermcare.gov very useful.